Abolishing the imputed rental value: what it means for retirees

The abolition of the imputed rental value has been decided – and retirees with a largely repaid home are among the biggest winners. The reason is simple: they lose little from the removal of the mortgage interest deduction, because there is hardly any interest left, but they gain the complete removal of a notional income often worth CHF 15 000 to 25 000 a year. The reform is not yet in force, though: as things stand, 2027 or 2028 at the earliest is realistic. Until then the current system applies unchanged.

What is the imputed rental value?

A notional income you pay tax on for living in your own home. The reasoning: someone living in their own house saves the rent – and that «benefit in kind» is treated as income for tax purposes.

It is set by the cantons and amounts to roughly 60 to 70 per cent of the market rent for a comparable property. In exchange you may currently deduct mortgage interest and maintenance costs. The system is a package: notional income on one side, deductions on the other.

Why does this hit retirees differently?

Because the balance between the two sides shifts over an owner’s lifetime.

Someone buying at 40 has a large mortgage and correspondingly high interest. The deduction largely offsets the imputed rental value – for that group the system is close to a zero-sum game.

Someone who has been amortising for decades and is now 70 pays hardly any interest. The imputed rental value, however, is still added in full. That constellation has long been the core criticism of the system: those who own their home debt-free pay the most. The system change reverses that.

A worked example

A retired married couple lives in a house with a market rental value of CHF 30 000 a year. The imputed rental value is around CHF 18 000 to CHF 21 000 depending on the canton. The remaining mortgage is CHF 150 000 at 1.5 per cent.

	Today	After the system change
Imputed rental value as income	+ CHF 20 000	removed
Mortgage interest deduction	− CHF 2 250	removed
Maintenance deduction (flat rate, example)	− CHF 3 000	largely removed
Effect on taxable income	+ CHF 14 750	CHF 0

For comparison: on a mortgage of CHF 800 000 at 1.5 per cent the interest would be CHF 12 000 – the deduction would then offset the imputed rental value almost entirely. So the advantage of the change shrinks as the remaining debt rises.

What exactly was decided?

Formally, Switzerland voted on 28 September 2025 on a constitutional amendment allowing cantons to levy a special property tax on predominantly owner-used second homes. It was approved with around 58 per cent in favour. That also triggered the legally linked federal act containing the actual system change.

Specifically: the imputed rental value on owner-occupied property – main residence and owner-used second home alike – is abolished. In exchange, the mortgage interest deduction for owner-occupied property largely falls away, with a temporary exception for first-time buyers. The maintenance deduction falls away for direct federal tax; cantons may temporarily continue deductions for energy-saving and environmental measures, and heritage conservation work remains deductible.

When does it apply?

The Federal Council sets the date. It is not yet final; 2027 or 2028 at the earliest is realistic. Until then the current system applies unchanged – imputed rental value, interest deduction and maintenance deduction.

That is the practically most important message: there is no pressure to act. Anyone amortising hastily or postponing renovations today is betting on a date nobody knows yet.

What is worth checking already

Plan maintenance timing. While the maintenance deduction still applies, value-preserving work is more attractive for tax than it will be afterwards. If a renovation is due anyway, do not postpone it indefinitely. Conversely: value-adding investments – an age-friendly conversion usually among them – were never deductible as maintenance, but they reduce property gains tax later.

Reconsider amortisation. Without the interest deduction, the tax incentive to hold a large mortgage falls. For retirees there is a second effect: a lower loan-to-value ratio eases the affordability calculation – see mortgages after retirement. Both point the same way, but check your liquidity reserve and any exit costs on fixed-rate mortgages before acting.

Clarify supplementary benefits. The imputed rental value currently counts as income for supplementary benefits. How the change plays out there depends on the transitional provisions and is not yet settled. If you receive them or might, ask your compensation office before major decisions.

Factor it into a move. If you sell the house and buy a senior apartment, your starting position changes anyway. What that costs in incidental fees is covered in purchase costs when downsizing.

General information on the Swiss tax system is published by the Federal Tax Administration FTA; the specific cantonal rules are with your cantonal tax administration.

Summary

• The system change was approved on 28 September 2025 with around 58 per cent in favour, but takes effect in 2027 or 2028 at the earliest.
• Retirees with a largely repaid home benefit most: the imputed rental value goes, and the lost interest deduction barely counts.
• The higher the remaining debt, the smaller the advantage – with a large mortgage the two roughly cancel out.
• Until it takes effect the current system applies unchanged. There is no pressure to act.
• Still worth doing: plan maintenance timing, reconsider amortisation, and ask your compensation office if you receive supplementary benefits.